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Asha started business with cash Rs 3,00,000 and furniture Rs 1,00,000. She bought goods on credit for Rs 80,000 and sold goods costing Rs 50,000 for cash Rs 70,000. She paid Rs 10,000 as cash expenses. What is her capital at the end, using the accounting equation?
Closing capital is Rs 4,10,000. Opening capital of Rs 4,00,000 increases by net profit of Rs 10,000, which is the Rs 20,000 gross profit on the sale less Rs 10,000 of cash expenses. The credit purchase affects only stock and creditors, not capital.
- ARs 4,10,000Correct
- BRs 4,00,000
- CRs 4,20,000
- DRs 4,60,000
Explanation
Opening capital is 4,00,000. Profit on sale = 70,000 - 50,000 = 20,000; less expenses 10,000 gives net profit 10,000. Closing capital = 4,00,000 + 10,000 = 4,10,000. Check: assets = cash 3,60,000 + furniture 1,00,000 + stock 30,000 = 4,90,000; liabilities 80,000; capital 4,10,000. Rs 4,20,000 ignores the expenses.
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